Full Judgment
APO No. 188 OF 2011
WITH
AP 529 of 2008
IN THE HIGH COURT AT CALCUTTA
Civil Appellate Jurisdiction
ORIGINAL SIDE
NATIONAL BUILDING CONSTRUCTION CORPORATION LIMITED
Versus
JOYDEEP PAUL
BEFORE:
The Hon'ble JUSTICE KALYAN JYOTI SENGUPTA
The Hon'ble JUSTICE JOYMALYA BAGCHI
Date : 21st September, 2011.
Mr. Amitava Ghosh, Adv.
....... For appellant.
Mr. Sarajit Mitra, Adv.
....... For respondent
The Court: - This appeal concerns the judgment and order of the learned Single Judge who has refused to set aside the award of the learned Sole Arbitrator. It appears from the record that arbitration proceeding has been started way back in 1998. Before the learned Arbitrator claimant/respondent made a claim for a sum of Rs.1,20,89,063.00 on eight heads of claim together with interest. The respondent/appellant also filed their written statement. Apart from contesting the claim made by the claimant/respondent a counter claim of a sum of Rs.191.87 lac on seventeen heads, has also been made. In course of hearing of the arbitration proceeding before the learned Arbitrator an attempt was made to compromise the matter under Section 30 of the Arbitration and; Conciliation Act, 1996. An application was filed with the learned Arbitrator annexing a Terms of Settlement whereby and whereunder the following agreement was attempted to be made. The relevant portion of the clauses are as follows;- 2
"An aggregate sum of Rs.17,27,106.00 was agreed to be paid by the appellant in full and final satisfaction of the claim.
a) Over and above a sum of Rs.17,27,106.00 against six escalation bills (to be prepared) is payable to the claimant.
b) It was agreed further that the Bank Guarantee lying with the respondent towards performance guarantee of Rs. 7,38,805/- furnished by the claimant is to be returned in original after being duly discharged.
c) It has also been settled that recovery of the cost of materials due to excess consumption of cement and steel is to be worked out at Rs.3,83,745.58.
d) It has also been settled further that NBCC Ltd.will have to deduct an amount of Rs.1,64,746.00 against insurance for contractors' all risk policy and certificate of which is to be handed over to the Claimant. Parties agree further that they will be at liberty to place their respective claims in the event settlement proposed does not mature. It is pertinent to record that this Terms of Settlement was admittedly signed by the claimant/respondent as well as officials who participated before the learned Arbitrator.
When this application for bringing about a settlement under Section 30 was taken up for hearing the appellant before us did not appear and the said application not being joint application could not be entertained, consequentially the terms of settlement could not be accepted to resolve the disputes under Section 30 of the Arbitration and; Conciliation Act, 1996. Thereafter the learned Arbitrator decided to proceed with the matter to hear out in accordance with law.
It is an admitted position that neither the claimant/respondent nor the respondent/appellant brought any witness to prove their respective claim before the learned Arbitrator.
As we see from the record the learned Arbitrator has passed an award relying on the signed Terms of Settlement as being an admission. Therefore, the award was passed to the extent of Rs.17 lakh and odd. The security amount covered by the 3
performance guarantee was also awarded. The learned Arbitrator also granted compound @ 9% from the date of making reference till the date of passing of the award and thereafter at the rate of 18% per annum.
The aforesaid award was challenged before this Court contending that the learned Arbitrator ought not to have relied on the said Terms of Settlement which was not accepted at one stage. Furthermore, even if it is taken for argument sake for passing an award then there are other terms that bind the claimant, no award was passed in relation thereto by the learned Arbitrator. The rate of interest awarded by the learned Arbitrator is not only high but the same is dehors the terms and conditions of the original contract being clause 37.01 (at page 17 of the paper book).
In fact there has been no material so to say to pass the aforesaid award. According to the appellant/respondent the Terms of Settlement which was not acted upon by either of the parties, nor even accepted by the learned Arbitrator at one stage for settlement, should not have been made foundation of passing of the award. Therefore, the award is perverse having no basis at all nor any material. The learned Trial Judge, however, refused to accept this contention, and held that learned Arbitrator has correctly and legally accepted the said agreement to be a valid piece of evidence by way of admission on record.
In this appeal Mr. Ghosh appearing for the appellant contends reiterating the stand taken before the learned Trial Judge. He submits that this award is based on no evidence in true sense. When the agreement was not really accepted by parties and in fact clauses of the agreement specifically provided if no settlement is reached the matter be decided in accordance with law, placing all claims.
In his alternative argument he submits that even if this agreement signed by the by the official of the appellant is taken to be a valid document still then it cannot be enforced as claimant's interest accepted unilaterally the interest of the respondent as provided in this agreement has not been considered at all. In this agreement there has been no provision for granting interest at any rate whatsoever hence the interest ought not to have been allowed at all. Even if it is allowed it ought not to have been granted such rate which is not permissible under the Arbitration and; Conciliation Act, 1996. He has drawn our attention to the power of the learned Arbitrator with regard to grant of interest following the Supreme Court's judgments reported in AIR 2011 4
SC 2620 and AIR 2010 SC 3337. In the context of the aforesaid judgments he has also drawn our attention to Clause 31. He contends that the learned Arbitrator is totally prohibited and/or precluded from granting any interest and by applying legal principles laid down in the aforesaid two Supreme Court's judgments the learned Arbitrator ought to have held that he had no power to grant any interest at any rate. Mr. Sarajit Mitra, learned Advocate apearing for the respondent contends that the agreement was signed by both the parties and in fact the signatory on behalf of the appellant was a competent officer who participated in the hearing before the learned Arbitrator and he has been authorised to sign the document, hence the learned Arbitrator has rightly and lawfully relied on the document to record admission. He contends that admission is conclusive proof unless the same is explained away. No one has come forward to deny and dispute the correctness and genuineness of this agreement. Hence the learned Arbitrator has not done in the matter, any wrong in any sense by relying on the said document. He then contends the rate of interest granted by the learned Arbitrator is just and proper The award was passed relying on the admission as far as principal amount is concerned and there has been no prohibition in the said agreement for granting interest by the learned Arbitrator. He has also advanced the legal proposition that when power to grant interest is silent it is the discretion of the learned Arbitrator to grant so at any rate as may be permissible.
As far as the bank guarantee is concerned he informs that the said amount of bank guarantee has also been encashed and the money is lying in the hands of the appellant and directed to deposit the said amount in a savings bank account till the result of the arbitration proceeding.
After considering the submission of the learned counsel for the parties now the question is whether the learned Judge is justified in accepting the award which has been passed relying on a document purporting to record some terms of settlement signed by some persons which include an officer of the appellant. However, the dispute is whether the signatory officer of the appellant in the said document is an authorized person or not. From the record it appears that relying on the said agreement an application was sought to be filed under Section 30 of the said Act but the learned Arbitrator in the 73rd meeting rejected the said application. Therefore exercise on the part of the learned Arbitrator to deal with the said agreement was futile exercise. 5
When this agreement was not worked out under Section 30 the learned Arbitrator had had no option but to proceed with the arbitration proceeding and indeed proceeded with the arbitration proceeding on merit.
The question remains whether the learned Arbitrator was justified in awarding the amount in favour of the respondent relying on the said document which is said to be an agreement between the parties. On reading the award which is well reasoned, we do not find the learned Arbitrator any where has recorded that the said agreement is legally proved document. It is true this agreement was part of an application filed by the claimant unilaterally and ultimately such application was dismissed and the document annexed to the dismissed application was relied on by the learned Arbitrator to record in the award accepting some clauses recorded therein to be an admission on their part. We are of the view that the learned Arbitrator has not proceeded in accordance with law as no one has proved the signature of this person who has signed on behalf of the appellant. The learned Arbitrator automatically accepted the genuineness and correctness of the signature of the officer and also the authority thereof. Moreover, if it is assumed to be a legally acceptable document, all the terms and conditions mentioned therein ought to have been accepted. The document has to be relied on as a whole, and some of the terms cannot be picked up selectively leaving terms advantageous for another party. Last clause of the said document unmistakably records if the settlement is not arrived at the arbitration proceeding will be proceeded with. Therefore, this contradiction in the document itself records the document is inadmissible and unacceptable one. Apart from that document there has been no evidence to pass any award. We, therefore, hold that the award is perverse having no material or basis whatsoever. We accordingly set aside the same. Now the learned Arbitrator has to proceed de novo with the arbitration proceeding. We remand the matter to proceed afresh and this should be done within a period of two months from the date of communication of this order.
So far as the monies lying in the savings bank account is concerned that will be invested in a short term fixed deposit as the savings bank account fetches lesser rate of interest and this amount will be reinvested in the term deposit which fetches higher rate of interest. This deposit shall abide by the result of the arbitration proceedings. 6
It appears that matter could have been settled otherwise, unfortunately because of non-cooperation of the appellant the matter could not have been settled. Therefore the appellant shall pay costs assessed at 20,000/- to be paid to the respondent. The appeal is disposed of.
Let xerox certified copy of this judgment and order be given to the parties, if applied for, upon compliance of all formalities.
(KALYAN JYOTI SENGUPTA, J.)
(JOYMALYA BAGCHI, J.)
ANC/GH